Stocks Cap a Big Week With Gains

Dow On Pace for Biggest Monthly Advance Since 1987; Focus Turns from Europe to 'Super Committee'

By

Steven Russolillo

Updated Oct. 28, 2011 10:00 p.m. ET

NEW YORK—U.S. blue-chip stocks finished slightly higher Friday, as investors took a step back and reflected on Europe's plan to combat its debt woes.

The Dow Jones Industrial Average rose 22.56 points, or 0.18%, to 12231.11, after bouncing between positive and negative territory for much of the trading day. The blue-chip index's intraday trading range was less than triple digits for just the second time since July 22, a span of 69 sessions.

Stocks ended mixed Friday, as investors took a step back and reflected on Europe's plan to combat its debt woes. The Dow ended higher but the Nasdaq finished with a slight loss. Steven Russolillo has details on The News Hub.

With European leaders finally hammering out a deal on the region's debt crisis, David Wessel on The News Hub looks at the risks that remain and why they can spillover to the U.S. economy and markets.

The small gains came a day after the Dow surged 339.51 points as investors cheered a European plan to combat Greece's debt issues, expand a bailout facility and recapitalize the region's biggest banks.

"This is just a pause after a pretty big surprise," said
Michael Sansoterra,
portfolio manager of the RidgeWorth Large Cap Growth Fund. "Folks are by and large a little less pessimistic. The reality is [Europe's] plan is a positive step in the right direction, but there's still a lot of heavy lifting to do."

The Standard & Poor's 500-stock index inched up 0.5 point, or 0.04%, to 1285.09. With just one day of trading left in October, the index is on pace to notch its first month without a back-to-back decline for the first time since Oct. 2006, underscoring the resiliency stocks have exemplified this month.

U.S. stocks open modestly lower on Friday, with investors taking a breath after a two-day leap that came in relief over Europe and added 501 points to the Dow industrials.

Questions still remain regarding how Europe will implement its bold plans and whether they will be enough to resolve the Continent's debt crisis.

"People are wondering if it's safe to go back into the water," said
John De Clue,
senior vice president at U.S. Bank Wealth Management. "Everyone applauds leaders in Europe for taking some steps forward, but we've been down this road before, and there still aren't a lot of details released yet."

Friday's action came after a report showed Americans boosted their spending last month even as wages barely inched higher. Consumer spending rose by 0.6% in September, matching economists' expectations. That followed a 0.2% rise in August. Income, meanwhile, was up 0.1% last month, following a 0.1% fall in August.

Additionally, U.S. consumers turned less pessimistic at the end of October. The Thomson Reuters/University of Michigan consumer sentiment index rose to 60.9 from a 57.5 reading earlier in the month. The latest reading was better than the 58.5 number economists were expecting.

The Dow is up 12% in October, on track for its biggest monthly percentage gain since 1987.

Investors are now shifting their attention from Europe to U.S. fundamentals. More than 300 companies in the S&P 500 have reported third-quarter earnings, with 71% notching results above analyst expectations, according to Thomson Reuters.

The next big focus is expected to be Congress's so-called "super committee" on deficit reduction, which is set to decide on budget cuts by Thanksgiving weekend.

"We're going to move from the powerful underlying earnings story to start to worry about what the super committee is going to come up with and whether they're going to make meaningful progress in deficit reduction," said
Andrew Slimmon,
managing director, global investment solutions at
Morgan Stanley
Smith Barney in Chicago.

In corporate news, Hewlett-Packard was the Dow's biggest gainer, rising 3.5%, after the technology company said it will keep its $40 billion personal-computer business. The decision reversed an announced plan earlier this summer to shed the unit.

Whirlpool slumped 14% after the appliance maker revealed third-quarter results that missed expectations. The company also lowered its full-year earnings outlook and announced a cost-cutting plan that included a 10% reduction in its work force.

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